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This is a pretty common libertarian vs. nanny state disagreement – should consumers be allowed to make their own choices, but I don’t think it’s that simple, for a few reasons. (Before you go on, I think it’s worth reading my previous piece on some failure modes of the market.)

Keeping toxic chemicals out of kids toys can’t really be the responsibility of the parents, because it’s not within their domain of control. You can be a responsible parent, you can only buy toys you “trust” (whatever that means) and your child will still be exposed to toys you didn’t have any say about. It’s unavoidable – other kids have toys, day care centers have toys, kids play with toys in the playground that other kids bring or leave behind. The only way to prevent these toys from coming into contact with kids is to keep them out of the marketplace to begin with. If you like, it’s society’s responsibility to keep poisons out of kids’ toys in general, because the incentives don’t line up for the individual actors.

After-the-fact deterrents are simply not effective. Lawsuits take years to resolve, are overly burdensome, and it may be impossible to even track down the responsible party (I’m told it’s nearly impossible to sue a foreign company). On top of that, even an expensive PR-nightmare lawsuit may not be a sufficient deterrent to a large corporation with a hefty legal budget. A few million dollar settlements can seem very small in the face of a few hundred million in profits per year. Also, it’s worth noting that this is a reactive response which doesn’t actually fix the problem, but tries to throw monetary compensation in an attempt to “make things better”. But that’s basically what we’re being asked to accept here with the free market solution – let us do what we want and if you don’t like it, sue us, because it’s “too expensive” to ensure that we make safe products. We have that prefrontal cortex for a reason – people are uniquely capable of making predictive decisions, and to allow reactive forces to handle problems we can plainly see are coming seems ridicuously primitive to me. One might argue that we don’t have the capacity to predict how our actions might affect these complex systems, but that’s exactly why we need to be able to adapt and tweak them as we go. I haven’t seen any evidence that the market makes better choices in these kinds of situations, and in fact the call for regulation is a response to the failure of market forces – these companies have already shown an inability to keep toxic ingredients out of their products, yet we still continue to have these problems. Public outrage and whatever lawsuits are currently in the pipeline haven’t served as an adequate deterrent. Why’s that? I don’t know.

This is similar to the conundrum faced by small food producers. See Joel Salatin’s Everything I Want To Do Is Illegal for a lot of good examples of this. The main thrust is that the rules that are meant for large corporations where the overhead gets absorbed by the scale are overly burdensome for small producers, who don’t have the resources for dedicated testing facilities but also have less capacity to do harm, both because they have fewer customers but also because some kinds of harm are caused by the steps needed to operate at scale in the first place. I like to buy local food from farmers that I’ve come to know and trust. This can work at a small scale – if I want to see their operation, I can go visit the farm. I have no similar way to verify that with a larger company.

I don’t think that broken regulation is a condemnation of the entire idea of regulation, but I think it’s obvious that the rules need to be different depending on the scale of the domain they apply to. It is not unreasonable for Hasbro and Mattel to have to follow different rules than the guy who’s carving wood figures in his garage and selling them on etsy. Scale matters – more is different, and bigger is different.